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Studies in Bank Contagion: Three Regulatory Events
This research describes an analysis, using event-study methodology, of the reaction of the stock returns of a sample, drawn from the one-hundred largest bank holding companies, to certain actions of regulatory agencies. The first part of the analysis examines the reaction of the bank stocks to the closure of the Bank of New England, using cross-sectional variables not previously examined by other investigators. The second event considers the invalidation of interest-rate swap contracts by the British Law Lords, the highest court in Britain. The third case is an examination of the effects of actions taken to enforce the Community Reinvestment Act. All three events have significant abnormal returns in at least one sub-sample and event window. The results of the cross-sectional analysis and the lack of response to later events are consistent with market efficiency in the semi-strong form. The results are also consistent with the hypothesis that regulatory policies that emphasize consistency and banking system safety are desirable.
Locational Determinants of Real Estate Valuation: an Analysis of Spatial Autocorrelation in the Hedonic Pricing of Real Estate
Recent studies of the valuation of real estate have concentrated on the use of hedonic pricing techniques in which the implicit prices of the component characteristics of an asset are inferred from the observed sale price using regression analysis. All of these studies include as explanatory variables one or more locational factors, such as distance to the central business district, as proxies for the effect that location has on the utility of land. In this research, the explicit consideration of the location of real estate in terms of the geographic or Cartesian coordinates (spatial attributes) of observed sales is shown to be a potential substitute for such proxies, either wholly or in part. Such use of spatial attributes could improve the usefulness of the hedonic methodology while at the same time significantly reducing cost and eliminating sources of error.
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